What We’re Reading —

Craft Beer Is the Strangest, Happiest Economic Story in America

In almost every economic sector, including television, books, music, groceries, pharmacies, and advertising, a handful of companies control a prodigious share of the market.

The beer industry has been one of the worst offenders. The refreshing simplicity of Blue Moon, the vanilla smoothness of Boddingtons, the classic brightness of a Pilsner Urquell, and the bourbon-barrel stouts of Goose Island—all are owned by two companies: Anheuser-Busch InBev and MillerCoors. As recently as 2012, this duopoly controlled nearly 90% of beer production.

This sort of industry consolidation troubles economists. Research has found that the existence of corporate behemoths stamps out innovation and hurts workers. Indeed, between 2002 and 2007, employment at breweries actually declined in the midst of an economic expansion.

But in the last decade, something strange and extraordinary has happened. Between 2008 and 2016, the number of brewery establishments expanded by a factor of six, and the number of brewery workers grew by 120%. Yes, a 200-year-old industry has sextupled its establishments and more than doubled its workforce in less than a decade. Even more incredibly, this has happened during a time when U.S. beer consumption declined.

What explains the nature of the craft-beer boom? From several interviews with economists and beer-industry experts, I’ve gathered that there appear to be two big reasons—a straightforward cause and a more complex and interesting history.

The first cause is something simple yet capricious—consumer tastes. “At the end of the day, the craft-beer movement was driven by consumer demand,” said Bart Watson, the chief economist at the Brewers Association, a trade group.

“We’ve seen three main markers in the rise of craft beer—fuller flavor, greater variety, and more intense support for local businesses.” These factors are hardly unique to the beer industry. One could use the same descriptors to explain the concurrent rise of fast-casual restaurants, like Sweetgreen and Dig Inn, or the growth in expensive coffee from $5 lattes at Starbucks to a $55 cup of Esmerelda Geisha. There is, perhaps, a new trendiness to rare beer and expensive coffee that is luring new entrepreneurs into the space.

Read more here, from The Atlantic.

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